Australian Broker Call

Credit Suisse rates ABC as Neutral (3) -

Credit Suisse expects around 10% growth in EBIT in FY17 supported by a combination of price increases, a positive mix shift and volume growth.

A number of one-off issues will weigh on the first half result which implies a significant second half turnaround is required to meet estimates. The magnitude of the skew to the second half raises the risk profile and leaves little room for error, in the broker's opinion.

With the stock approaching fair value, exposure is preferred elsewhere in the sector. Credit Suisse downgrades forecasts by an average of -3-4% to reflect higher electricity costs, one-off rationalisation costs and costs associated with cement product quality at the Birkenhead facility.

Target is $5.70. Neutral rating retained.

Target price is $5.70 Current Price is $5.78 Difference: minus $0.08 (current price is over target).
If ABC meets the Credit Suisse target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.18, suggesting downside of -9.8% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.1

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Deutsche Bank rates ALQ as Buy (1) -

As the company has indicated corporate interest for its Asset Care business, Deutsche Bank points out this segment of operations provides asset reliability and integrity services to industrial asset owners, operators, constructors and manufacturers.

The operations in question are responsible for circa 10% of group revenue, or 6% of group EBITDA while FY17 saw an EBITDA margin of 12.8%. The business has recently suffered from the loss of LNG-related construction activity, but the analysts believe the outlook remains robust.

While a sale could become a positive trigger, with potential proceeds estimated in the $132m-$170m range, the analysts state it won't change their investment view on the shares. Buy rating and $7.41 price target retained.

Target price is $7.41 Current Price is $7.07 Difference: $0.34
If ALQ meets the Deutsche Bank target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $6.39, suggesting downside of -8.2% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgan Stanley rates BAP as Overweight (1) -

Morgan Stanley notes the Hellaby integration is on track and the company is set to deliver strong growth despite current weakness in the retailing sector.

The company is yet to publicly quantify the upside from optimisation projects but the broker envisages an opportunity for  $8-9m upside to automotive operating earnings. This may take time to deliver but the majority of the contribution is expected in FY19.

The broker believes the stock has been unfairly tied to the broader consumer discretionary sell-off but remains resilient. Overweight rating retained. Target is $7.00. Industry view: In-line.

Target price is $7.00 Current Price is $5.22 Difference: $1.78
If BAP meets the Morgan Stanley target it will return approximately 34% (excluding dividends, fees and charges).

Current consensus price target is $6.50, suggesting upside of 25.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.8

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

UBS rates BPT as Neutral (3) -

The company has set a target to maintain production output above 10mmboe for the next three years. UBS believes this is a highly ambitious goal, as Western Flank oil output is set to decline over this period as existing fields mature.

FY17 production guidance is set at the upper end of the range of 10.3-10.7mmboe. The broker notes unlocking the lower permeability McKinlay oil potential is one area of upside but exploration success both in oil-prone acreage as well as wet gas fields will be needed to lift output above the 10mmboe threshold.

UBS retains a Neutral rating and $0.65 target.

Target price is $0.65 Current Price is $0.61 Difference: $0.04
If BPT meets the UBS target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $0.68, suggesting upside of 11.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Credit Suisse rates CAJ as Outperform (1) -

The company's update has confirmed for Credit Suisse both improving trading momentum and the successful execution of a complex transformation strategy. Despite the rally in the stock the broker envisages further upside.

The broker believes the capital position is now significantly better but does not forecast any dividends, buy-backs or accretive acquisitions.

Outperform retained. Target rises to $0.30 from $0.21.

Target price is $0.30 Current Price is $0.25 Difference: $0.05
If CAJ meets the Credit Suisse target it will return approximately 20% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 1.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Deutsche Bank rates GNC as Hold (3) -

It is Deutsche Bank's view the June ABARES crop report is marginally negative for Graincorp with initial FY18 winter crop production estimated at 18.0mmt, -36% below the FY17 winter crop, but also -29% below Deutsche Bank's estimate.

Regardless, it is too early as yet to draw definitive conclusions, say the analysts. They retain a Hold rating and an unchanged $10.20 price target. No changes made to forecasts.

Target price is $10.20 Current Price is $10.29 Difference: minus $0.09 (current price is over target).
If GNC meets the Deutsche Bank target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $9.91, suggesting downside of -2.7% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.2

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Citi rates IGO as Buy (1) -

Citi analysts believe management at Independence Group is being prudent, selling the non-core Stockman copper-zinc project in Victoria, which the analysts suggest means IGO won't have to touch loan facilities in case of unexpected costs or weaker commodity prices.

Citi suggests Stockman is simply too small and in the wrong state, as all other assets currently under Independence Group ownership are in Western Australia. Buy rating and $4.16 price target retained.

Target price is $4.16 Current Price is $3.29 Difference: $0.87
If IGO meets the Citi target it will return approximately 26% (excluding dividends, fees and charges).

Current consensus price target is $3.90, suggesting upside of 19.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.7

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Credit Suisse rates IGO as Outperform (1) -

The company will sell its undeveloped Stockman copper/zinc project in Victoria for $28m. Credit Suisse believes the divestment is a logical move, securing a cash return and leaving management to focus on deploying capital more effectively on opportunities elsewhere.

Outperform rating and $4.30 target maintained.

Target price is $4.30 Current Price is $3.29 Difference: $1.01
If IGO meets the Credit Suisse target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $3.90, suggesting upside of 19.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.7

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Macquarie rates IGO as Neutral (3) -

The company will sell the Stockman copper/zinc project in Victoria for $32m and a royalty to a subsidiary of Washington H Soul Pattinson ((SOL)).

Macquarie had not included the development of Stockman in forecasts and believes the transaction is a positive outcome despite a -$20m impairment.

The key to the company's outlook is considered to be the ramping up of Nova to full production and/or the final update for the Tropicana Long Island study.  Macquarie retains a Neutral rating and target of $3.30.

Target price is $3.30 Current Price is $3.29 Difference: $0.01
If IGO meets the Macquarie target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $3.90, suggesting upside of 19.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.7

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Credit Suisse rates NEC as Outperform (1) -

Credit Suisse expects Nine Entertainment to benefit from the shake up in the TV sector as Ten Network ((TEN)) moves into voluntary administration.

Nine is expected to be a beneficiary because of the potential for a structural step up in its market share  as Ten will have to move to a lower cost and lower market share operating model. There will also be less competition for cricket rights which are due to be negotiated this year.

The broker expects Ten's ownership negotiations to be extremely complex but, longer term, still expects it to broadcast,, although it will be a much weaker competitor. Outperform rating and $1.50 target retained.

Target price is $1.50 Current Price is $1.37 Difference: $0.135
If NEC meets the Credit Suisse target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $1.18, suggesting downside of -8.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

UBS rates NST as Initiation of coverage with Sell (5) -

UBS believes the market is giving the company the benefit of the doubt regarding mine life, given its strong track record.

The broker's main concern is the market is underestimating the likely recurring discretionary exploration and re-investment expenditure that is needed to underpin future conversion of resources.

The broker is also concerned the market is overlooking the potential for underground grades to decline. With the stock priced for perfection UBS believes the risks are to the downside and initiates coverage with a Sell rating. Target is $4.64.

Target price is $4.64 Current Price is $4.93 Difference: minus $0.29 (current price is over target).
If NST meets the UBS target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.43, suggesting downside of -9.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.2

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgans rates ORE as Add (1) -

Morgans suspects that recent short sellers of the stock had anticipated a capital raising to fund capacity expansion at Olaroz. This is despite repeated management advice that development will be matched to cash flow.

The broker reiterates an Add rating and $5.36 target and the stock remains its preferred investment in the lithium sector.

The US$160m Olaroz stage II expansion will double capacity and the company is expected to fast track a proposed US$30m plant in Japan. Both developments are to be funded from cash flow and debt.

Target price is $5.36 Current Price is $3.69 Difference: $1.67
If ORE meets the Morgans target it will return approximately 45% (excluding dividends, fees and charges).

Current consensus price target is $4.18, suggesting upside of 20.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.8

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

UBS rates QAN as Buy (1) -

UBS has surveyed 1600 Australian travellers which has revealed an improving competitive position for Qantas in the domestic market. The skew towards service was a significant differentiator versus competitors, which are chosen on price.

The broker is increasingly confident in its forecasts for a record domestic EBIT result in FY18. In FY18 UBS expects Qantas to account for 90% of the domestic industry profit pool.

Forecasts are upgraded to take account of a lower fuel price and slightly better outlook for domestic revenue. Buy rating retained. Target rises to $5.90 from $4.70.

Target price is $5.90 Current Price is $5.45 Difference: $0.45
If QAN meets the UBS target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $5.06, suggesting downside of -6.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.9

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Ord Minnett rates SDF as Downgrade to Accumulate from Buy (2) -

Ord Minnett has reviewed the company's investor presentation. The broker notes additional focus on international expansion opportunities in the briefing.

The stock has risen strongly in recent months which leads Ord Minnett to reduce its recommendation to Accumulate from Buy on valuation grounds. Target is $2.70.

Target price is $2.70 Current Price is $2.80 Difference: minus $0.1 (current price is over target).
If SDF meets the Ord Minnett target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.77, suggesting downside of -1.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.8

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Ord Minnett rates TTS as Lighten (4) -

In reviewing the issues facing the company regarding its planned merger with Tabcorp ((TAH)) Ord Minnett believes the success of the merger will hinge upon vision/media as a condition for approval from the regulators.

There is an increasingly lower likelihood of the merger, prima facie, without a vision/media concession, given Tabcorp's near-monopoly ownership in this area, in the broker's opinion.

The broker lowest Tatts forecasts for FY17 earnings per share by -5.7% after recent updates and an update on the consumer sector. Lighten rating retained. Target is $4.10.

Target price is $4.10 Current Price is $4.23 Difference: minus $0.13 (current price is over target).
If TTS meets the Ord Minnett target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.28, suggesting upside of 2.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

UBS rates VAH as Sell (5) -

The March quarter trading update revealed a continued deterioration in profitability and marks the third quarterly decline in profitability following two years of improvement, UBS observes.

After reviewing current industry trends and updating fuel price assumptions the broker downgrades underlying expectations for pre-tax profit to a loss of -$19m in FY17. An improvement in profitability is assumed in FY18, driven by cost benefits.

Sell rating and $0.17 target retained.

Target price is $0.17 Current Price is $0.19 Difference: minus $0.015 (current price is over target).
If VAH meets the UBS target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.18, suggesting upside of 0.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.5

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Citi rates VOC as Neutral (3) -

While the company has set out a clear strategic plan Citi believes implementation is the challenge. While the opportunities are significant they do not look easy to the broker.

The broker still envisages a risk that a capital raising or asset sales may be needed and awaits clarity on this issue before taking a more positive stance. Neutral rating and $3.40 target retained.

Target price is $3.40 Current Price is $3.68 Difference: minus $0.28 (current price is over target).
If VOC meets the Citi target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.29, suggesting downside of -8.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Macquarie rates VOC as Neutral (3) -

Macquarie found the investor briefing positive as it allowed management to signal its plans without the distraction of explaining downgrades. Nevertheless, there were no financial targets on offer beyond a reiteration of FY17 guidance.

The broker considers the strategy a sensible one against the backdrop of KKR's proposal.  More detail on the outlook are expected in August at the results. Neutral rating and $3.60 target retained.

Target price is $3.60 Current Price is $3.68 Difference: minus $0.08 (current price is over target).
If VOC meets the Macquarie target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.29, suggesting downside of -8.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgans rates VOC as Hold (3) -

In its investor briefing the company highlighted financial discipline and the medium-term integration strategy is in focus.

Morgans observes there is a large amount of work to do to fully integrate and simplify the Australian business, but delivering on these outcomes should crystallise the company's market position and improve the investability and quality of earnings.

At present, the broker considers buying the stock to be speculative and retains a Hold rating. Target is $3.50.

Target price is $3.50 Current Price is $3.68 Difference: minus $0.18 (current price is over target).
If VOC meets the Morgans target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.29, suggesting downside of -8.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Ord Minnett rates VOC as Hold (3) -

FY17 guidance has been reiterated and Ord Minnett observes management has gone to great lengths to describe the steps it will take to realise the full potential of the company's assets.

With a large capital commitment to the Australia-Singapore Cable project the broker expects the company to preserve cash by suspending its dividend and reducing  non-ASC capital expenditure. This should not affect its ability to grow the top line.

While the transformation plan was encouraging, the broker believes it could take up to three years for the company to realise its full potential. Ord Minnett now models the dividend suspended in the second half and FY18 and a pay-out of 8c in FY19. Hold rating maintained. Target is $3.30.

Target price is $3.30 Current Price is $3.68 Difference: minus $0.38 (current price is over target).
If VOC meets the Ord Minnett target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.29, suggesting downside of -8.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

UBS rates VOC as Neutral (3) -

UBS believes, even with better free cash flow conversion,  aggressive assumptions are required for the business to hit private equity hurdles on internal rates of return, which typically range around 15-20%.

Organic growth, specifically in the corporate division, appears to the broker to be key to meeting these hurdles. Neutral rating retained. Target rises to $3.65 from $2.50.

Target price is $3.65 Current Price is $3.68 Difference: minus $0.03 (current price is over target).
If VOC meets the UBS target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.29, suggesting downside of -8.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Citi rates VRL as Neutral (3) -

The sale of the 50% stake in the Singapore exhibition business, suspending the dividend and reducing the stake in VREG lowers Citi's concerns about the balance sheet.

The broker forecasts FY18 net debt/EBITDA to fall to 2.6x, meeting the company's target. FY17-19 forecasts for earnings per share are reduced by -7-17%, primarily reflecting the removal of the Singapore earnings.

Neutral rating retained. Target rises to $4.05 from $3.60.

Target price is $4.05 Current Price is $4.00 Difference: $0.05
If VRL meets the Citi target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $3.67, suggesting downside of -6.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources